Senate Backs Cash Instead of Food Stamps : Poverty: States see administrative savings. But some people argue that children may go hungry because parents could buy whatever they wanted.

WASHINGTON — States won a victory on Capitol Hill for a critical element of anti-poverty policy Tuesday, persuading the Senate to allow them to distribute cash rather than food stamps to poor people.

The controversial cash option is popular with many states because it enables them to curtail administrative procedures and costs associated with the $27-billion food stamp program and provides flexibility to use the savings and even the cash payments themselves for welfare reforms.

But many advocates for the poor and supporters of federal nutrition programs ardently oppose the option, arguing that it will cause more children to go hungry because their parents will be free to spend the money on items other than food. Food stamp supporters say the concession could undermine the exceptional political support the 33-year-old program enjoys among the public and politicians.

An amendment to a $68-billion spending bill for the Agriculture Department and other agencies would have banned such "cash-outs" of food stamps. But in response to heavy lobbying by governors, the Senate voted, 63 to 34, to strike the provision. The House, however, already has passed a version of the bill that prohibits states from launching welfare reform demonstrations based on cashing out food stamps, so debate on the issue is not over.

Governors had sent letters to all senators urging them to continue to permit states the flexibility to use any remaining parts of their federal payments for food stamps to help reform their welfare systems.

"The Senate should embrace and encourage rather than prohibit state and local initiatives that will better serve needy Americans and help break the grinding cycle of poverty and dependence," Sen. John McCain (R-Ariz.) said.

Opponents, however, said cash payments have potentially dire consequences.

"Providing cash instead of coupons will increase the number of hungry children in America," Sen. Patrick J. Leahy (D-Vt.), chairman of the Senate Agriculture Committee, said during the debate. "I am worried that food stamp cash-out will leave poor families even poorer. I am worried that landlords will just raise rents, knowing that their tenants have additional cash."

McCain responded that such views have helped create a welfare system that encourages dependency, contributing to its unpopularity among taxpayers.

"I know that some advocates do not like the idea of cash-outs and wage subsidies because they fear that poor families will not or cannot make the proper spending choices if empowered to do so," he said. "To me, this kind of paternalism is at the core of our troubled welfare system."

States have had the cash option in the past but it has become increasingly popular as federal and state governments have begun trying to overhaul programs for the poor.

Eight states, including California, already have been given permission by the Agriculture Department to make cash payments instead of distribute food stamps in certain counties. Some states are experimenting with giving the food stamp money to employers to supplement wages of poor workers. Others are offering people on welfare a chance to get cash instead of food stamps if they go to work. Still others simply send poor recipients cash rather than food stamps.

Half a dozen other states have requests for the option pending and several others are preparing applications.

Studies of the experiments have found that, when given cash instead of food stamps, recipients buy less food. In San Diego County, where all households eligible for food stamps have been receiving cash since 1990, their food purchases decreased by 7%. In Alabama, a state where cash assistance is much lower, food expenditures decreased by nearly 20% when the state opted to offer eligible households in three counties cash rather than stamps.

Robert Greenstein, executive director of the liberal Center on Budget and Policy Priorities here, said history shows that, if cash replaces food stamps, American taxpayer support for the program will die.

Since the 1970s, benefits for Aid to Families with Dependent Children, the primary welfare program for cash assistance to poor families, "have fallen 45% in purchasing power, while food stamp benefits have stayed constant. Why is that? The American public is much more willing to support food stamps than cash assistance," Greenstein said.

President Clinton has made a point of stressing that he supports states' flexibility in designing solutions to welfare reform without excessive micromanagement by the federal government. His welfare reform initiative, which he introduced earlier this summer, sets a two-year time limit on AFDC benefits but not on food stamps.